The Nigerian naira which has been falling drastically against the U.S. dollar to an all-time low of 910/dollar in the past weeks has bounced back to 718 naira in the standard Market.
This turn-around came, weeks after the Central Bank of Nigeria (CBN) announced plans to redesign high-value currency notes of N200, N500 and N1,000 and reissued from December 15.
The CBN has set limits to acceptable amounts of cash deposits into accounts, warning that it would monitor such transactions in conjunction with the Economic and Financial Crimes Commission.
Since then, the EFCC has raided the offices of bureau de change operators and black-market currency traders in Abuja, Lagos, and other towns.
Meanwhile, the dollar sells for about N850 in the black market.
In Lagos, black-market traders attributed the recovery of the naira to its scarcity, saying this was responsible for the inability of speculators buying dollars to offer higher rates for the green back.
However, the President, Association of Bureau De Change [BDC] Operators of Nigeria, Aminu Gwadabe, said market sentiment and the news of the naira redesign drove the market in the past two weeks.
He said the rebound of the naira had made many currency speculators lose millions of naira. According to him, many forex dealers did not know the naira would rebound too soon.
He said, “I can say the surveillance by the EFCC and other factors affected the market. However, I can say that some global factors also affected the market aside from the local issues in Nigeria. Don’t forget that countries like Saudi Arabia, Russia and China are taking some steps that are currently affecting the dominance of the dollar.
“But locally, I can say certain sentiments made the naira rebound and these have led many speculators to lose millions of naira. Many took a position at N800/dollar and now they are worried the currency is now N720/dollar. This was why there was some resistance in the market today with many BDCs not willing to sell their dollar at a lower amount. People who kept the greenback are now bringing it out because of certain market sentiments.”
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, noted that there had been a decline in the rush for dollars after the announcement of the naira re-designed.
According to him, this decline might have led to the rebound of the naira.
He said, “It is a very volatile situation. The immediate reaction to that pronouncement triggered some rush to convert to dollars. That round of reaction is already beginning to die down. That’s a possible factor. Once that initial rush has subsided, it is possible that the pressure on the dollar reduced.”
He also noted that the recent rumour about some expiring dollar bills might have contributed to the rebound of the naira.